In the United States, bankruptcy statistics are climbing at an alarming rate. The past twenty years have seen a shocking increase in the number of people who are unable to manage their debt.
Thanks to public platforms raising awareness of these bankruptcy stats, many measures have been implemented in the hope of seeing the climbing figures drop exponentially. According to the available stats, more than 1.5 million people are filing for bankruptcy every year.
So, what does it mean to file for bankruptcy? It is a legal proceeding that may involve a business or an individual who can’t pay outstanding debts.
Today, we’ll be looking at some of these statistics to figure out why bankruptcy remains so common.
Astonishing Bankruptcy Stats (Editor’s Choice)
- 5% of bankruptcy cases are attributed to reckless spending.
- 52 mega bankruptcies were recorded in the first three quarters of 2020, which is the highest number to date.
- A 2019 study covering 43 countries showed that 48% of them reported decreasing bankruptcy rates.
- 20% of US bankruptcies were filed by well-educated people.
- 52% of filers for bankruptcy are male.
- In 2019, the largest number of corporate bankruptcies was in New York.
General United States Bankruptcy Statistics
1. 62% of personal bankruptcies in the United States were due to medical expenses.
A study conducted by Harvard University has shown that, without doubt, the most significant of all US bankruptcy statistics is that nearly two-thirds of all bankruptcies were due to medical expenses. One of the most interesting figures to come out of this study was that 72% of the bankruptcy filings had come from people with some form of health insurance. While this was a shock, it also crushed the myth that medical bills only affect the uninsured.
Medical bankruptcy statistics show that people taken by a rare disease or some form of serious illness will be left with hundreds of thousands of dollars in medical bills. Medical bills of this size can easily wipe out any savings, equity accounts, and college funds and leave no other option but to go bankrupt. Eventually, a surge in the US bankruptcy rate is likely to happen.
Moreover, with advancements in technology, healthcare costs in the United States are at an all-time high. As new illnesses emerge and more people become patients, health insurance is becoming expensive and extremely confusing.
It is no secret that Americans face their greatest financial difficulties regarding medical care. Since 26% of Americans between the ages of 18 and 64 are struggling to pay their medical bills, it’s no wonder these bankruptcy filing statistics show that medical expenses cause more people to go bankrupt than anything else.
2. 5% of bankruptcy cases are attributed to reckless spending.
In previous decades, illnesses and unemployment were the major causes of bankruptcy. But this has dramatically changed in recent years. When we look closely at the latest American bankruptcy statistics, most personal bankruptcies were driven by overspending. This only tells us that being frivolous with our money can often land us in a lot of trouble.
A recent study presented at Boston College, MIT, Yale, and UCLA showed that some Americans are guilty of spending way beyond their means. While it may not be the leading cause of bankruptcies, this frivolous spending has revealed another shocking truth.
Namely, some Americans were spending beyond their means with the sole intention of filing for bankruptcy. Spending like this was used to eradicate some of their existing debt.
Although this represents only a small percentage of the US personal bankruptcies by year, it can still put more pressure on the system to tighten the reins concerning the criteria for filing for bankruptcy.
3. 97% of bankruptcies are filed by individuals.
One remarkable fact bankruptcy trends insinuate is that individuals file the vast majority of bankruptcies, contrary to the belief that the majority of bankruptcies would fall under the corporate umbrella. This is why bankruptcy law is such a lucrative occupation nowadays.
According to corporate bankruptcy statistics, bankruptcies involving corporations account for only 3% of the total number.
At first, this figure may seem unbelievable, but it shouldn’t really come as extremely shocking. We have already seen some mind-boggling medical bankruptcy data, so when we consider other personal causes of bankruptcy, the figures make sense.
4. National bankruptcy data shows there’s a correlation between credit debt and bankruptcy.
Earlier in the article, we have seen that medical issues are the highest contributing factor to personal bankruptcies. Based on healthcare bankruptcy statistics, they make up 62% of individual bankruptcies.
The second biggest cause is credit debt. But there’s a twist to it. Even if data on national bankruptcy clearly shows a correlation between credit debt and bankruptcy, the facts are not what you may think.
Most people would presume that irresponsible spending would lead to credit debt, but this is not always the case. If you suffer from job loss, illness, or even an emergency expense, you may be forced to use a line of credit.
A problem that you will have to face once you have filed for bankruptcy is that credit will probably no longer be an option for you. Your credit score after bankruptcy will plummet, and with a poor credit score, you are very unlikely to have a line of credit available to you.
5. Personal bankruptcy statistics reveal that 8% of people who file for bankruptcy have filed at least once before.
According to recent studies, 8% of people have filed for bankruptcy on multiple occasions, and these repeat filers make up nearly 16% of all recorded bankruptcies.
People who do this are generally using the system to their advantage. Although many wonder whether filing for bankruptcy is a public record, having the information available is hopefully a way of deterring repeat offenders and people trying to trick the system.
However, it is worth mentioning that while bankruptcy cases are available for public viewing, this does not mean that the public easily obtains the information.
If a person becomes bankrupt, their record will be made available on a public access system known as PACER. The PACER system has details on bankruptcy filings from across the United States.
US Bankruptcies 2020 — Corporate Level
6. As of September 2020, 470 companies have gone bankrupt.
In light of the COVID-19 crisis that has negatively affected the economy, it’s not surprising to see more and more companies filing for bankruptcy. If we look at the historical data on corporate bankruptcies by year, the latest figure is bigger than the filings recorded during any comparable period since 2011.
June and July saw the biggest number of announced US bankruptcies — 71 in total. The analysis included public companies or private companies having public debt with assets or liabilities of at least $2 million at the time of filing a bankruptcy.
7. Based on bankruptcy statistics, the consumer discretionary sector has the largest number of bankruptcies — 93.
The bankruptcies 2020 report shows that most of the companies that filed for bankruptcy came from the consumer discretionary sector. The analysis is limited to public or private companies with public debts and assets or liabilities equal to $2 million or more at the time of bankruptcy filing. It also includes private companies having either assets or liabilities greater than or equal to $10 million at the time of filing.
8. The first three quarters of 2020 recorded the highest number of mega bankruptcies — 52.
Historical bankruptcies data show that the number is greater than in any full year during the 2005–2019 period. The only exception is the year 2009 when mega bankruptcies reached 57. The analysis of mega bankruptcies covers companies with over $1 billion in assets at the time of filing.
Personal Bankruptcies 2020 — Based on Demographic Profile
9. Well-educated people file 20% of American bankruptcies.
Many misconceptions are flying around when it comes to bankruptcy. But the simple truth is — it can happen to anybody.
The American Bankruptcy Institute Statistics clearly show that, while 20% of filers have a college degree, 29% have some form of college education, and 36% are high school graduates. As you might recall, even President Trump has occasionally filed for corporate bankruptcy over the years. While the Trump bankruptcy cases were not individual claims, he has filed a chapter 11 bankruptcy claim as much as six times.
10. Personal bankruptcy rates for males (52%) are higher than for females (48%).
According to findings by Dan Mangan at CNBC, men are more likely to file for bankruptcy than women. The gap between the two is very small, but the reasons are very different.
The majority of men who file for bankruptcy do so after losing high-paying jobs. In contrast, 48% of women who file for bankruptcy are forced to do so due to a divorce, as the divorce statistics show.
11. 60% of people who file for bankruptcy earn less than $30,000 a year.
Data on American bankruptcies show that many people filing for bankruptcy are on low household incomes. The figures also show that only 9.2% of people who earn $60,000 per year go bankrupt.
12. According to personal bankruptcy statistics, 64% of people who file for bankruptcy are married.
Nearly two-thirds of people who file for bankruptcy are married. In these cases, many of them file jointly for bankruptcy, making the whole process a lot easier.
If we look at this, alongside the other figures associated with filers, we can see that married people are far more likely to file for bankruptcy than any other demographic. For example, 15% of those filing for bankruptcy are divorced, 17% are single, and 3% are widowed.
Bankruptcy Statistics 2019
13. In 2019, New York reported the largest number of corporate bankruptcies.
Concerning corporate bankruptcy filings, 2019 has certainly been a year for shake-ups. This is what bankruptcy statistics by year clearly demonstrate. In the second quarter of the year, a significant number of corporate bankruptcy filings were recorded for each of the states mentioned below:
- New York — 636
- California — 577
- Texas — 530
- Illinois — 486
- Pennsylvania — 483
When it comes to bankrupt states and their trends, the Golden State has been at the forefront of bankruptcy news. In 2010, over a quarter million individual bankruptcies were filed in California alone.
This all-time high was mainly caused by the recession in 2007. Since 2013, California has really started to pick things up, and the filings have dropped exponentially.
14. A 2019 study covering 43 countries showed that 48.8% reported decreasing bankruptcy rates.
A 2019 study conducted by Dun & Bradstreet managed to shine a positive light on the global bankruptcy statistics. It showed that from 43 countries, 21 made reports stating that bankruptcy rates had dropped, 18 countries saw a rise in filings, and four countries reported no change at all.
This is a positive trend, but with impending economical changes coming thick and fast, the world bankruptcy statistics for 2020 will show things in a very different light.
Brexit will lead to some rather extreme consequences and the ongoing trade disputes between China and the US. China is implementing a slowdown in consumer and industrial spending that will surely have a detrimental impact on its import.
Meanwhile, the alarming bankruptcy statistics in the United States serve as the Federal Reserve’s basis for putting an end to the interest rate bump. This will hopefully reduce the amount of pressure on businesses.
If there is one thing that should be crystal clear from this article, it is that there is no shame in filing for bankruptcy. While there may be certain connotations attributed to filing, most of them are false. If you're unsure about any step of the process, you should consult with a legal professional first.
Whether you are an individual or a business, filing for bankruptcy can give you the fresh start you deserve.
Although the latest bankruptcy statistics may be of some concern, they are there to help you see that you will soon be on the path to financial recovery. And there is always light at the end of the tunnel.